Anna Ürmössy Post-Cold-War Inequalities in Central and Eastern Europe

The contradictions of the official ideology and the economic policy of the
FIDESZ government
- The fight against Western ideology, but not against Western capital

Introduction
This study will examine the seemingly contradictory relation between the official rhetoric and
ideology, and the economic policy of the current illiberal regime in Hungary. In the past ten
years, ever since the FIDESZ came into power, a clear dialogue started against global
institutions such as the IMF, the European Union and the so-called “Western values”.
Meanwhile, however from 2010 one could experience the growing influence of western
capital, especially the German car industry, in Hungary. The question arises: What causes this
contradiction? One might say that the answer lies in the hypocrisy of the current government:
they use the official ideology and illiberal populism to deceive the people, while they act in a
different mindset, to increase their own economic prosperity. Nevertheless, this
interpretation might not give a sufficiently deep explanation to the question at hand.
Therefore, this study intends to provide a more detailed and complex analysis which takes
into account the place of Hungary in the world-system, and in the work distribution of the EU,
not just in the present, but also historically. What I aim to emphasize is the following: firstly,
that the illiberal populism of the regime is not a distinct phenomenon, but rather an outcome
of a long-term historical process; secondly, that the economic policy of FIDESZ cannot be
understood only as their own decision, instead it must be examined as an act deeply
embedded in the complexity of Hungary’s dependency of Western capital, deriving from its
semi-peripheral position; and thirdly, that the ideology and the economic policy are not
separate entities that happen to contradict one another, but they have a complex connection
and causality between them, and they both have to be examined in an international context.

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Anna Ürmössy Post-Cold-War Inequalities in Central and Eastern Europe

The Semi-Peripherical Position of Hungary: Economic Dependency in the Past and

the Present
This part of the study starts with a brief historical overview of Hungary’s western dependency
from the mid-nineteen century until the present day (Éber, Gagyi, et al. 2014). There is more
emphasis on the period after the regime change, with focus on the rise of the competition
state (Drahokoupil 2009) and the current position of Hungary at the semi-periphery (Éber,
Gagyi, et al. 2019). To exemplify the country’s western dependency there is special attention
paid to the role of the German car industry in Hungary and the policy strategies that the
government use to attract and keep the German companies, even with low tax incomes and
on the cost of the workers’ interest (Gerőcs and Pinkasz 2019).

Economic Dependency and the Rise of the Competition State

It cannot be clearly stated when the Hungarian dependency started, but it can be said that
once capitalism developed in the western part of Europe while in the eastern part the
aristocracy still maintained its feudal power, an unequal distribution of work appeared. The
semi-periphery of Europe, including Hungary, started to specialize in agrarian products and
raw materials for export, and imported industrial products from the core. In this system the
exchange rate was always worse for the countries of the semi-periphery, which led to a
constant economic dependency. During the Austro-Hungarian dualist period, the high amount
of western capital inflow further deepened the dependency, and later, after the First World
War Hungary tried to enforce its weakened economy by inviting German industry into the
country. Throughout the state-socialist period due to the technological underdevelopment,
the industrialization did not lead to the prosperity of the economy. Instead, Hungary got into
a debt spiral, of which it could not get out until the transition to capitalism. (Éber, Gagyi, et al.
2014). Due to the severe debt-crisis, an intensive privatization process followed the transition,
during which most of the previous state property was acquired by foreign investors. From the
late 1990s the competition state became a hegemonic project in the region. The V4 countries
developed a structural dependency of foreign capital, a process which was facilitated by the
European regulatory framework among other things. The hegemony of the competition state

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was now “beyond party politics”: to survive in the global neoliberal economic system, the
importance of FDI was inevitable (Drahokoupil 2009). In relation to this process Drahokoupil
mentions an additional aspect, which is the role of the comprador service sector in
„translat[ing] the structural power of transnational capital into tactical forms of power that
enable[s] agential power to work in sync with the interests of the multinationals” (Drahokoupil
2009). This comprador service class is based on the alliance of local and global elites and its
function is to mediate between local and multinational actors by investment agencies,
chambers of commerce or lobbying activity.

The Car Industry and the Economic Policy

Although there are many sectors of the Hungarian economy, I choose to exami ne the car
industry, which has shown a significant growth since 2010. This industry illustrates best the
one-sided dependency of Hungary from western, in this case mostly German, capital. After
1989, and especially after 2004 (the year when Hungary joined the EU) the Hungarian market
opened for foreign investment and the car industry started to prosper. From 2010 until 2017
the FDI of the car industry compared to all the FDI of the country rose from 4% to 14%, which
is an apparently tremendous growth (Gerőcs and Pinkasz 2019). Although this might seem like
a purely positive change, there are three aspects that should be considered. Firstly, the
Hungarian industry is usually situated lower in the hierarchical structure of the global value
chain, meaning that the country mostly specializes in small-scale, standardized production.
This position in the hierarchy means that the profitability is comparably lower than in the
higher positions, however, the competition with other producers is bigger, and the risks of
exclusion from the value chain is higher. Secondly, that even the profit created here often
leave the country, which can be explained by the majority of foreign shareholders. Thirdly,
that considering the product life-cycle theory of Vernon (Vernon 1966 in: Gerőcs and Pinkasz
2019), usually products in their phase of decline get to be produced in Hungary. For example,
while in the home countries the development and production of electric motors has already
started, the production of combustion engines is moved to the semi-periphery (Gerőcs and
Pinkasz 2019). Acknowledging these features of the industry, it becomes visible, that in the
case of Hungary one cannot talk about an equally beneficial economic relation, but rather a
one-sided dependency. On top of this, there is also an intense competition between the states

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of Central-Eastern Europe to attract and keep the capital of German car industry. The
economic policy of the Hungarian government can be understood as a consequence of this
competition.

The government has three main strategies to appeal to foreign capital: work-regulation,
education and beneficial tax rates. Work regulation is maybe the most visible example: first
the new strike law in 2010, which made it difficult to legally organize efficient strikes; followed
by the modification of the fundamental laws concerning work regulation (Munka
Törvénykönyve) in 2012, which made flexible employment easier and the unions even weaker;
and lastly the “slave law” of 2018 which started a wave of protests due to its inhumanity
towards workers. With regard to education, the government introduced a dual vocational
training, which made it compulsory for students to work in car factories as apprentices for low
wages, as part of their education. Finally, the 9% corporation tax in Hungary is the lowest in
the EU, and in reality, large companies pay even a smaller percentage as a result of state
concessions (Bucsky 2018 in: Gerőcs and Pinkasz 2019). It is important to underline that these
regulations are heavily influenced by the German companies and the local comprador service
sector as well. The interests of the foreign capital are translated into tactical forms of power
(Drahokoupil 2009) by lobbyist activity and institutions such as the German-Hungarian
Chamber of Commerce.

Ideology in Relation to the West and the Rise of Illiberal Populism

This part of the study consists of the in-depth examination of the rhetoric and ideology of
illiberal populism, reviewed in a post-colonial framework. The main argument is that it is not
a separated experience neither in time nor in space. By referring to Kiossev’s theory of
sublimative rationalizations (1995) and Gagyi’s notion of antidemocratic populism (2014) I
would like to highlight the historical roots and the opposition of two different ideologies
regarding east-west relations. Furthermore, by using Korolczuk and Graff’s study (2018) about
anti-genderism, it can be shown that the rise of illiberal populism is not just a local, but a global
phenomenon, and a way in which actors channel their discontent about their place in the
global neoliberal economic system.

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Dealing with the Subaltern Position of the Country

Sublimative Rationalizations

In his essay, Notes on self-colonizing cultures (1995), Kiossev tries to explain the roots of the
self-colonizing tendencies in Eastern-European countries, such as Bulgaria or Hungary. He
argues that these cultures were born with a trauma, namely that they are less developed, less
civilized than the western cultures. This is a birth-trauma in the sense that their inferior
position, - not just culturally, but economically too – has been the only reality since the
formation of the nation state. As it was mentioned in the previous part of the study, the
dependency towards the West was present ever since the dawn of capitalism and this
dependency formed heavily the ideology and rhetoric regarding east-west relations.
According to Kiossev the affected nations try to suppress their traumas by different types of
sublimative rationalizations. One type of these rationalizations leads to the development of
two competing doctrines in the country. One group represents the “westernization”, the
progressivism, they idealize the west, the other group, on the other hand takes a nativist
approach, by inventing an authentic substance and tries to return to the “uncorrupted”
culture. (Kiossev 1995) These two groups were present even in the mid-nineteen century
Hungary, and are present today as well. This shows that the current ideology represented by
the FIDESZ-regime is not something new, instead it has a deep historical embeddedness.

Democratic Antipopulism and Antidemocratic Populism

Similarly to Kiossev, Gagyi states that the nation somehow must deal with its subaltern
position compared to the west. She calls the two main ideologies that the elites take
democratic antipopulism and antidemocratic populism. (Gagyi 2014) In the case of democratic
antipopulism, represented by the previous governing party, MSZP, the elites try to liberalize
the market and “westernize” the country. On the individual level they identify with some kind
of self-loathing ascetism and try to emancipate the nation in a self-colonizing manner. On the

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other hand, when antidemocratic populism takes place, as we can see with Viktor Orbán, the
elites identify the nation as a guardian of “true” European values and rely heavily on the
historical sufferings of the country. On the subjective level, they turn to a compensatory
narcissism, by which they redefine the traits that were stuck on the nation and try to see them
in a positive way. In both cases, Gagyi argues, the nation keeps the structures and ideas
constructed by the oppressing system and only reinterpret them. (Gagyi 2014)

The Connection of Ideology and Policy

What we have seen so far is a somewhat determined economic policy, accompanied by a
hegemonic ideology, which either idealizes or defines itself against the west. The ideology
always derives from the centuries-long economic and cultural dependency of the core
countries. The ideologies might change back and forth, but it seems that the dependency of
the west is inevitable. The question arises: what is the scale of this determinism? Is there a
way to resolve the contradiction between the ideology and the economic policy of the current
regime? One might say that by entering into economic relations with China and Russia, the
Hungarian government aims to free itself from the one-sided dependency of the West.
However, it is clear that in the current economic system it is impossible for Hungary to
“exchange” its Western dependency to an Eastern one (Éber, Gagyi, et al. 2019). But even if it
could, would that change anything?

At this point it is worth turning to Korolczuk asd Graff’s notion of anti-genderism. It somewhat
overlaps with Gagyi’s idea of antidemocratic populism, however it has some further insights.
While Gagyi’s and also Kiossev’s theory focuses on the East and the West, anti-genderism
examines a similar phenomenon on a global scale. What the authors state is that anti -
genderism goes far beyond the traditional anti-feminist rhetoric, and forms a complex
ideology system that includes the critique of the global neoliberal elites and the liberal value-
system, such as human rights and gender equality (Korolczuk and Graff 2018). Similarly to
Gagyi and Kiossev the authors argue that the ideology relies heavily on an anticolonial
framework, staging anti-genderists as defenders of the people, saviors of the “oppressed
majority”. The reason why their theory is relevant now is to show that the rise of illiberal
populisms such as the Hungarian one, is a global phenomenon which affects many countries.
The other main advantage of the theory, that it calls the attention to the role of global

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organizations and elites such as the IMF or WTO (Korolczuk and Graff 2018). Even if the Orbán
regime manages to break away from western dependency, it is not possible to break away
from the global neoliberal economy, however hard they continue their “freedom fight”
against foreign capital.

Conclusion
As presented in this study, we could see the inherent contradiction of the current
government’s official ideology and economic policy. By reflecting on the semi-peripheral
position of Hungary in the world-system and the country’s centuries-long western
dependency I intended to present the complex nature of the above-mentioned contradiction.
It is essential to examine Hungary’s post-socialist traits and its position in the global neoliberal
economic system in order to be able to investigate the ideological hegemony of the current
regime. The rhetoric of the FIDESZ government builds on an anti-colonial framework,
positioning the country as oppressed and themselves as the savior. This ideology can be
understood as a compensatory reaction to the historically rooted economic dependency and
the (alleged) cultural subaltern position of the country (Gagyi 2014; Kiossev 1995). Finally, it
is important to stress the global nature of illiberal populism: firstly, it is a globally-spread
ideology, and secondly it is an ideology against global economic institutions and elites.
Korolczuk asd Graff’s notion of anti-genderism helps to understand the Hungarian processes
in a global context as well.

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